Consumer confidence drops in July, inflation expectations highest since April 2023

Inflation expectations have reached their highest levels since April 2023 in the latest ANZ Roy Morgan Consumer Confidence measure. Photo / Steven McNicholl

Consumer confidence has dipped down again amid expectations of rising inflation, according to the latest ANZ Roy Morgan survey.

Consumer confidence fell by four points to 94.7 in July, after rising in June by six points to 98.8.

Inflation expectations reached their highest level since April 2023, lifting 0.2 points to crack through the 5% barrier at 5.1%.

The measure was once again impacted by food price inflation, which is currently up 4.2% year on year, as well as insurance, electricity and council rates.

Meanwhile, house price inflation expectations hit the lowest level in over a year, falling from 3.6% year on year to 2.9% year on year.

ANZ chief economist Sharon Zollner said it was fair to say the economy is making hard work of recovering from last year’s recession.

“Activity indicators have slipped in recent times and it’s entirely possible that both GDP and employment went backwards in the June quarter,” Zollner said.

“The housing market is going nowhere fast. Soft consumer confidence is both a reflection of and a contributor to the sluggish economy.”

The proportion of households who think it’s a good time to buy a major household item, it was down one point to -8.

Perceptions of current personal financial situations dropped sharply, falling by eight points to -21%.

Respondents also felt negative regarding the economic outlook over the next 12 months, with the measure falling three points to -16%.

A net 11% of respondents expect to be better off this time next year, losing the gains made in June.

Perceptions of the economic outlook five years ahead remained steady at +7.

The future conditions index made up of forward-looking questions fell four points to 100.9, while the current conditions index fell five points to 85.4.

Zollner said she expects things to improve as every month more people switch to a lower mortgage rate and higher farmer incomes support the regions.

“While inflation is clearly front of mind for households, we do expect things to ease on that front towards the end of the year.

“The Reserve Bank is forward looking, and we expect that easing inflation pressures will allow them to cut the Official Cash Rate more than they currently anticipate in order to shore up the recovery.”

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.